Question

43)

Alloy has annual fixed operating costs of $200,000 and variable costs of $400 per camper. Total fees charged to campers amount to $600 each. The camp expects 400 campers next summer. Projected government grants are $100,000. How much must Alloy raise from other sources to break even?

(1.67pts)

$50,000

$30,000

$60,000

$20,000

Answer 1

Solution:

Fees charged per camper = $600

Variable cost per campler = $400

Contribution margin per camper = $600 - $400 = $200

Annual fixed operating cost = $200,000

Projected government grant = $100,000

Expected sales of campers = 400 camper

Contribution margin from sale of camper = 400 * $200 = $80,000

Amount to be raised from other sources to breakeven = Fixed ocst - Projected government grants - contribution from camper

= $200,000 - $100,000 - $80,000 = $20,000

Hence last option is correct.